NCLT Delhi Admits SVOGL Into CIRP Despite Pending Winding-Up Proceedings

The Delhi bench of the National Company Law Tribunal (NCLT) has admitted SVOGL Oil Gas and Energy Ltd. into the Corporate Insolvency Resolution Process (CIRP), ruling that pending winding-up proceedings do not prevent admission of an insolvency petition if no irreversible steps have been taken.

A bench comprising President Justice Anupinder Singh Grewal and Technical Member Ravindra Chaturvedi held that “where irreversible steps have not been taken, the Company can be saved from the rigours of winding up or liquidation” through CIRP under the Insolvency and Bankruptcy Code (IBC).

The bench added that the NCLT could not bypass the insolvency resolution process and proceed directly to liquidation when a winding-up matter was transferred to it by a High Court.

The Delhi High Court ordered SVOGL to be wound up on July 28, 2017, and appointed an Official Liquidator to take possession of its assets. On July 25, 2023, the High Court transferred the winding-up proceedings to the NCLT for consideration under the IBC.

Punjab National Bank (PNB) and State Bank of India had approached the High Court seeking the transfer. The lenders argued that the winding-up proceedings had not reached an advanced stage and sought to prevent the company's valuable assets from losing value during liquidation.

The NCLT noted that no auction had been held and no claims had been invited when the transfer was sought. The High Court had directed the Official Liquidator to retain control of the company's properties, subject to further orders from the NCLT.

PNB began extending credit facilities to SVOGL in 2006. These included term loans, short-term loans, letters of credit and bank guarantees. The lending arrangements were subsequently expanded through a consortium of banks.

In August 2010, SVOGL sought further credit facilities totalling Rs 857 crore. The order separately records consortium credit limits totalling Rs 786.50 crore in March-April 2013.

After SVOGL failed to comply with the corporate debt restructuring arrangement, PNB exited it on June 22, 2016. The bank classified the account as a non-performing asset on June 30, 2016, with effect from December 26, 2013.

PNB recalled the loans, issued a demand notice under the SARFAESI Act and initiated recovery proceedings. In its insolvency petition, the bank reported claims of about Rs 1,526.95 crore as of November 30, 2024.

The Official Liquidator, representing SVOGL, did not oppose admission of the petition.

The NCLT relied on the Supreme Court's rulings in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd. and A. Navinchandra Steels Pvt. Ltd. v. SREI Equipment Finance Ltd. to hold that pending winding-up proceedings do not prevent CIRP if no irreversible steps have been taken.

The bench observed that CIRP offered a better chance of maximising asset value and reviving SVOGL as a going concern. It also ruled that the tribunal could not bypass CIRP and proceed directly to liquidation under the IBC.

The tribunal admitted PNB's petition, imposed a moratorium and appointed Resurgent Resolution Professionals LLP as the Interim Resolution Professional. It directed the Official Liquidator to hand over the company's assets and documents to the IRP and assist in the process. The IRP must take charge without delay and invite claims through a public announcement within three days.